Dodd-Frank backers heap praise on GE Capital decision

Proponents of the Dodd-Frank financial reform law are taking a victory lap after regulators relaxed rules on a financial firm.

Advocates for strict rules on Wall Street said the Wednesday decision by regulators to step back oversight on GE Capital is actually a good sign for the landmark financial reform law. Regulators decided Wednesday that the lending arm of General Electric no longer posed a threat to the overall financial system, and as such did not require the heightened regulations that come with being a “systemically important financial institution,” or SIFI.

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Seeing regulators relax rules on a lender does not usually earn praise from reform advocates, but that was exactly the case with this latest move.

That’s because seeing the Financial Stability Oversight Council (FSOC) remove a SIFI designation for the first time proves to them that Dodd-Frank is working as intended.

“The Council’s action shows that ‘systemically important’ firms have a clear choice between stricter oversight or reducing their threat to taxpayers and financial stability,” said Sen. Sherrod BrownSherrod Campbell BrownOn The Money: Trade chief defends Trump tariffs before skeptical Congress | Kudlow denies plan to demote Fed chief | Waters asks Facebook to halt cryptocurrency project On The Money: Trade chief defends Trump tariffs before skeptical Congress | Kudlow denies plan to demote Fed chief | Waters asks Facebook to halt cryptocurrency project Maxine Waters calls on Facebook to halt cryptocurrency project MORE (D-Ohio) and Rep. Maxine Waters (D-Calif.), the top Democrats on Congress’s banking panels, in a joint statement. “FSOC is working just as Wall Street Reform intended: to protect working Americans from once again bailing out ‘too-big-to fail’ institutions. “

Critics of Dodd-Frank had long targeted the SIFI process, arguing that it handed regulators far too much power and that the process was too opaque. Congressional Republicans argued the SIFI process effectively labeled which banks are “too big to fail,” practically guaranteeing a government rescue should any of them falter.

The de-designation also came at a critical time for regulators. At the same time regulators stepped back regulation on GE Capital, the government is actually embroiled in a lawsuit with MetLife. The insurance giant is challenging its SIFI designation in court and won a lower court ruling that the government is currently appealing.

For advocates, seeing regulators remove a SIFI designation for the first time proves that the process can work as intended. That is, an institution can take steps to remodel its business in a way that convinces regulators they no longer need the added scrutiny.

“Contrary to the nonstop, hysterical claims of industry and its political allies, FSOC has been thorough, deliberative, and fair throughout the designation process, focusing carefully on a rigorous data-driven analysis and clear systemic threats,” said Dennis Kelleher, president and CEO of Better Markets, a Wall Street reform advocacy group.

GE Capital aggressively reworked how it does business after receiving a SIFI designation in 2013. It simplified and shrank its financial operations, working to reduce its footprint on the overall financial system.

Treasury Secretary Jack LewJacob (Jack) Joseph LewHogan urges Mnuchin to reconsider delay of Harriet Tubman bill Mnuchin says new Harriet Tubman bill delayed until 2028 Overnight Finance: US reaches deal with ZTE | Lawmakers look to block it | Trump blasts Macron, Trudeau ahead of G-7 | Mexico files WTO complaint MORE said the company made “fundamental strategic changes that has resulted in a company that is significantly smaller and safer.”